The GBP/USD currency pair faced significant declines on Thursday, trading deep in negative territory near 1.2400, following unexpected developments from the Bank of England. The central bank's decision to cut the policy rate by 25 basis points, as anticipated by analysts, was accompanied by commentary that shocked investors and contributed to a cautious market stance. This dovish initial reaction coupled with disappointing U.S. data helped to limit losses for the currency pair, which struggled to gain traction amid the prevailing market conditions.
The Bank of England's decision to lower interest rates was in line with expectations; however, the updated forecasts for growth and inflation delivered alongside the rate cut took investors by surprise. The central bank's commentary suggested a more pessimistic outlook for the UK economy, adding to the market's cautious sentiment. This cautious stance has provided support to the U.S. dollar, further weighing on the GBP/USD's performance.
U.S. economic data also played a role in shaping market dynamics on Thursday. The weekly Initial Jobless Claims rose to 219,000, surpassing expectations and adding to the disappointment surrounding U.S. economic indicators. These figures have contributed to the challenges facing the GBP/USD pair, which is struggling to find upward momentum.
Meanwhile, the EUR/USD remained under pressure below 1.0400 during the second half of the day on Thursday, reflecting broader market apprehension. As the year unfolds, markets are already feeling the impact of Donald Trump's second term in office, adding another layer of complexity to the current economic landscape.
It is important to note that neither the author nor FXStreet are registered investment advisors, and this article is not intended to provide investment advice. The information presented serves to inform readers of recent market developments and should not be construed as guidance for financial decision-making.